Glencore buys out billionaire with $1bn deal

London - Glencore agreed to a $960m deal with Israeli billionaire Dan Gertler to buy out his holdings in two Congolese copper and cobalt mines, ending a decade-long relationship in which both built up key mining assets in the country.

Glencore will pay Fleurette Group, a company owned by Gertler’s family trust, $534m cash after all debts are paid, the company said in a statement. The assets include a 31% stake in Mutanda Mining, the world’s biggest cobalt mine, and a 10.3% holding in Katanga Mining, which operates a nearby copper and cobalt mine.

The deal allows Glencore to end a relationship that has brought much scrutiny, both for corruption investigations into Gertler and for the close nature in which the two companies developed their business. The deal also allows Glencore to take full ownership of the mines as commodity prices recover from a three-year lull.

Cobalt prices have shot up 75% since the beginning of last year on demand from Tesla, which uses the metal for the lithium-ion batteries that power its cars.

Cobalt production at Mutanda, which operates in southern Democratic Republic of Congo, rose almost 50% last year to 24 500 metric tonnes, according to Glencore. By comparison, the global output of the metal totaled 110 000 to 120 000 tonnes in 2016, according to supplier Darton Commodities. Mutanda also produced 213 300 tonnes of copper.

The Mutanda stake is valued at $922m, and the holding in Toronto-listed Katanga is valued at $38m, according to the statement from Glencore.

Ending ties with Gertler may protect Glencore from political uncertainty in Congo if the billionaire’s friend President Joseph Kabila leaves power following planned elections this year. Kabila’s second and final term expired in December.

It also puts some distance between Glencore and Gertler, four months after the company said it was reviewing bribery allegations said to implicate the billionaire. Gertler denies any wrongdoing and hasn’t been charged.

The allegations are contained in a September deferred-prosecution agreement between hedge fund manager Och-Ziff Capital Management Group LLC and the US Department of Justice. In the agreement, Och-Ziff acknowledges participating in the bribing of Congolese officials. Och-Ziff’s partner in Congo among others paid more than $100m in bribes over a decade-long period, according to the agreement. That partner is Gertler, according to a person familiar with the matter.

Mining tycoon

Glencore’s investments in Congo have been in partnership with Gertler, who provided an enviable line to the top. As the 23-year-old scion of a diamond trading family, Gertler first landed in Congo in 1997 shortly after rebel leader Laurent Kabila toppled the government. Gertler befriended Kabila’s son and army chief Joseph, who took over the reins in 2001, when the older Kabila was assassinated.

After years trading rough diamonds, Gertler branched out into copper, cobalt, iron ore and gold, building a business empire worth more than a billion dollars. As he did so, Gertler says, he brought more investment and employment to Congo than any other single investor, in part through his partnerships with Glencore.

Some of those mines, including Mutanda, turned Congo into Africa’s top copper producer and spurred economic growth, even as two-thirds of the population still live on less than $1.90 a day. In other cases, development of oil and copper deposits stalled after Gertler became a shareholder. This week’s deal with Glencore provides him with cash for such assets.

Peter Grauer, the chairperson of Bloomberg LP, is a senior independent non-executive director at Glencore.

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